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Wednesday, July 4, 2012

Costs of Proceeding for Politicians

A lot of election judicial decisions have been released recently. Yesterday I blogged about the decision of the Court of Appeal in the fight between the Ontario Progressive Conservatives and the Working Families Coalition.

As well, the Court recently dismissed an application by several former Liberal leadership candidates (Hedy Fry, Martha Hall Findlay, and Joe Volpe) - again, on preliminary grounds - to extend the time for paying their campaign expenses. That might just affect their chances of a successful leadership bid this time around.

There were many irregularities in the 2011 general election. Many of them suggest fraud - for example, the so-called "robocall" scandal - but not all of them. This case involved innocent voter registration errors in Etobicoke Centre, where many people were not properly identified before voting. (The irregularity opens the door to grassroots frauds by individual voters, but no institutional fraud connected to the government or any political party existed.) Boris Wrzesnewskyj, the Liberal candidate, was defeated by Conservative Ted Opitz by a total of 26 votes.

Justice Lederer heard Wrzesnewskyj's application under the Elections Canada Act and allowed it, finding that, even without any fraud, the irregularities were sufficient that they could have affected the election result. (Note: This is not a finding that, but for the errors, Wrzesnewskyj would have won. The finding is that, if one assumes that the irregular votes are voided, without knowing which candidate they were cast for, we cannot determine who the successful candidate would be. So a new election is required.)

This case is going to be heard by the Supreme Court in a special summer sitting next Tuesday (July 10).

The New Decision: Costs

Wrzesnewskyj asked for his legal costs as against Elections Canada. Justice Lederer starts off by commenting on the quantum of costs sought, and notes that they are probably reasonable, but I'm not going to start there.

Ultimately, Justice Lederer denied a costs award, except for a return of the $1000 that Wrzesnewskyj was required to post as security for costs. The decision, when compared to costs jurisprudence generally, is very strange.

Essentially, it turns on the innocent nature of the irregularities. Ted Opitz had nothing to do with the irregularities, and is essentially a victim of the irregularities in the same way as Wrzesnewskyj was. He ought not to be burdened with costs because of the innocent errors of Elections Canada. The real fight became whether Elections Canada ought to have to pay costs, because the application was necessary to correct Elections Canada's mistakes. The mistakes, however, were innocent and understandable - Justice Lederer notes that, over the course of 37 days, Elections Canada hired and trained 235,867 people and ran a national election. "[E]rrors will be made. This is not a question of blame, but in the nature of what these people were asked to do. The system has checks. An application to set aside an election is one of them. In this case, the lessons to be learned are not who is at fault, but how to improve the system so the same mistakes are not made again." Justice Lederer went on to find that this was a matter of "public interest and of general concern", and that it is part of the "collective responsibility of all Canadian citizens to bring such matters into the public sphere." So no costs were payable.

Sounds fairly reasonable, right?

The trouble is this: Costs are not, in general, based on fault. Rather, they are in the nature of indemnification of a successful party.

Blameworthy behaviour is a factor in costs, but this is more relevant when we're talking about blameworthy behaviour in the course of legal proceedings. The question, for costs, is who is successful and who is not successful, and the implication is that the party who was not successful should not have required the party who was successful to incur the legal fees associated with going to trial. Thus, we have a general rule that 'costs follow the cause', that the party who is successful in an action, motion, or application should be compensated by an award of costs.

Here are Justice Lederer's comments on "success":

Paragraph 5: "Borys Wrzesnewskyj bases his claim on the understanding that he was the successful party. Without going further, this seems reasonable....The problem is that, if costs are to be awarded to a successful party, there ought to be an unsuccessful party who is expected to pay them."

So nobody can be said to have been unsuccessful? Nobody argued for a conclusion other than the one the Court reached? Clearly that's not the case - If it were accurate to say that Ted Opitz was not unsuccessful, then why would he be appealing?

Costs are not, in the main, about who was right or wrong in the matters leading up to the litigation. They are about who was successful in the litigation itself. There's a lot of overlap, but the point is this: Imagine a wrongful dismissal case - I fired you without notice and without just cause, and offered you 8 months of notice. You turned down the offer and sued for 12. I continued to offer 8 months of notice. Following the trial, the Court awards you 6 months. Who was successful? Easy. I was. Yes, I breached your contract. Yes, I owed you money. These were never contested. The question, on litigation, was how much I owed you, and I was clearly successful on that point. Which means that, most likely, I will get a costs award. Even though you were completely blameworthy - you carried out your duties effectively and diligently, and were dismissed for no other reason than that I decided to restructure, and I did so in a manner which actually breached your contract - the Court may award costs against you, and the point is this: You should have taken the 8 months.

The decision on the merits, found here, indicates that Ted Opitz and Elections Canada were arguing against the Application. Wrzesnewskyj brought an application, and Opitz opposed it. Elections Canada, despite purporting to take no position on the merits of the application, nonetheless argued in favour of a certain interpretation of the statutory language which, if successful, would have resulted in the dismissal of the application. The judge rejected these arguments. Wrzesnewskyj succeeded on all fronts, and those who opposed his application, or parts of his application, did so unsuccessfully.

Unopposed applications are usually pretty academic. The Court still has to be satisfied that there's a basis for the order sought, but you generally would not need - as was required in this case - 8 days of hearing with six lawyers for an unopposed application.

A costs award on a strictly unopposed application will require principles of fault. "The reason I needed to make this application is that the respondent has failed and refused to satisfy his legal obligations." Even a respondent who doesn't participate, under those circumstances, may still be required to pay costs.

If Opitz and EC had said "We're not participating in this process, and we'll abide by whatever the Court makes of the applicant's materials", then there would be no basis for a costs award. And the process would have been a lot cheaper all around. Still costly, but on a much smaller scale. That's the consequence of a blameless situation.

But, even in a case with no blame, a party cannot take full advantage of the adversarial legal system to defend his own interests, force an 8 day hearing, then come back after being unsuccessful and say "It's not my fault that we had to come here." That is almost exactly the point of the loser-pays system - it puts the greater financial burden on the person with the position that is unsuccessful, with the result that the possible financial burden becomes a significant incentive to settle for people who are concerned about uncertainty in the result of the case.

Perhaps more importantly, the Court's comments about it being a matter of public importance which there is a civic duty to bring into the public sphere, making it inappropriate for costs...are deeply undermined by the statutory requirement that an applicant post $1000 in security for costs. (Consider this: Had Opitz successfully resisted the application, and it was found that the irregularities did not justify voiding the election result, would Wrzesnewskyj have been similarly insulated from cost consequences? Almost certainly not. That kind of asymmetrical result is deeply unfair.)

Now we come to the quantum, which Justice Lederer accepted was probably much lower than the actual costs incurred: Wrzesnewskyj was seeking an award of $90,000. By extension, assume that he spent well over $100,000 on legal fees. That's a lot of money to be expected to pay as a matter of one's civic duty.

To be completely fair, it appears that Wrzesnewskyj was not seeking an award of costs against Opitz, and in my view he would have been the more appropriate party to have to pay costs. But EC, despite not arguing about the facts, made unsuccessful arguments of law, which in my humble opinion should have resulted in some exposure to costs. And the fact does remain that they were mistakes which were ultimately attributable to EC itself, even if they are understandable under the circumstances. If you make a good faith mistake, and somebody else has to pay to correct it, the good faith won't usually insulate you from cost consequences.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.